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(a) Explain fully the conditions on which a worker’s bargaining power depends. (6)
(b) Define a reservation wage and explain why firms want to pay more than the reservation wage. (6)
(c) Use an illustrative diagram to show and explain how the natural rate of unemployment is affected by an increase in unemployment benefits. (8)
The Namibian economy is described by the following equations, where: t is marginal tax, Y is income; I is investment spending; G is government spending; L is money demand; M/P is money supply, i is interest rate and C is consumption. The interest rate is measured in percentage terms while all the other variables are measured in millions of Namibian dollars:
C = 100 + 0.8 ( 1-t)Y
t = 0.25
I = 600 -80i
G = 900
L = 0.5y - 60i
M/P = 1500
(a) Derive the equation for the Is curve. (4)
(b) Derive the equation for the LM curve. (4)
(c)Determine the values of income (Y) and interest rate (i) and show these values on an IS –LM diagram. (8)
(d) What are the equilibrium levels of consumption and investment?
) Suppose currency to deposit rato is 040 and required reserve ratio is 0.10 and Govt. buys bonds from public which increase the Monetary Base by Rs. 10000. Find out how much money supply will be changed? Also find the money multiplier.
a) Consider an economy in which the labour force grows by 2.7 percent per annum, physical capital grows by 4 percent per annum and human capital grows by 1.8 percent per annum. Suppose 45 percent of national income goes to labour and 40 percent to capital. Use a constant returns to scale production function to answer the following growth accounting questions:
i. If the Solow residual were zero what rate of growth would the economy achieve?
ii. The country’s actual rate of growth has been 4.5 percent per annum, which is faster than the growth rate generated by the accumulation of capital and labour stocks. Calculate the value of the residual.
2) Suppose that the government passes a law requiring households to increase savings 10% above previous levels. According to Solow's growth theory, in the long run output per capita will grow less rapidly.
Which of the following statement(s) about Gross Domestic Product is incorrect?
i. Compensation of employees (wages) is the single largest component of aggregate income.
ii. Transfer payments buy no goods or services.
iii. Aggregate income equals aggregate expenditure and both equal GDP.
iv. Investment is the flow that adds to the stock of capital.
v. Gross domestic product includes depreciation.
Group of answer choices
i, ii, iii and iv only.
i, iii, iv and v only.
ii, iii, iv and v only.
ii only.
Which of the following is related with the “within in a country” principle of the GDP calculation:
Group of answer choices
Output that is produced by a South African owned textile factory in Zambia which is later supplied as finished apparels to Edgars South Africa.
A South African trained doctor, treating patients in Kenya.
Water consumed in Gauteng that is sourced from the Lesotho Highlands Water Project at a fee.
Biltong sold in a Johannesburg supermarket but produced/cured in Durban.
Based on the circular flow of income, identify from the following items what can be considered as a withdrawal/leakage in the South African economy.
i. Government spending on wages of civil servants.
ii. A local resident purchasing an imported capital good.
iii. Swaziland purchasing a inyala from the Denel Ltd a South African government owned defence and military equipment manufacturer.
- iv. A decision by the government to purchase French nuclear energy technology instead of the Russian technology.
Consider an economy with the following aggregate production function:Y = 3K1/3(AL)2/3
Capital grows through investment but also decays due to wear and tear at a constant rate δ per period. Assume that A is growing at the exogenous rate g, that L is growing at the exogenous rate n, and that households save a constant proportion s of their income.
a. Find the steady state level of the capital per effective worker (k*), output per effective worker (y*) and consumption per effective worker (c*) - in terms of the parameters of the model.
b. What is the level of k (k**) that maximizes consumption?
d. To move to the level of capital that maximizes consumption, how should the saving rate be changed? Explain.
e. Calculate the saving rate needed to reach the golden rule level of capital per effective worker.
Illustrate and examine how the individual supply of labor curve demonstrates the way an individual divides his/her time between work and leisure
